TaxTMI 
TaxTMI 
2010 (12) TMI 1101
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....support structures to generate, transmit and distribute electricity. The petitioners are also registered under the A. P. VAT Act. They were issued a certificate under section 8(3)(b) of the Act, read with rule 13 of the CST (Registration and Turnover) Rules, 1957 (hereinafter called, "the Rules"). In their application seeking registration, the petitioner sought inclusion of various items including goods, machinery equipment, building material, etc., which they claimed were integrally connected with the generation and distribution of electricity. The Commercial Tax Officer issued show-cause notice dated December 1, 2008, proposing to delete several items, registration of which was sought for by the petitioner, on the ground that these items were used for construction of buildings and other uses; they were not directly related to power generation; and did not fall within the ambit of section 8 of the Act. The petitioner submitted its detailed reply thereto on December 20, 2008 explaining the entire process of developing and establishing a power plant for generation, transmission and distribution of electricity. They sought inclusion of goods, for construction of the labour colony, th....
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....cted or under contemplation, and what were the activities that may take place therein, if any; the office building did not constitute a part of the apparatus to be employed for carrying on activities integrally connected with the generation and distribution of power; the office building, which was not an integral part of the power plant and power house building, could not be said to be integrally connected with the construction of a power plant for generation and distribution of power; and, for the same reason, the request as regards the requirement of goods for building a compound wall could not be considered. The STAT further held that there was no material placed by the petitioner, in the records before it, like approved plans, if any, for the labour colony, office building and compound wall; there was no mention of the area, the plinth area and the number of houses in the proposed colony; the number of rooms in the houses and the office building; the rough/approximate estimate of costs, including cost of the goods; and, under the guise of statutory requirement, the petitioner could not make an all-inclusive/wide spread request without giving even the bare minimum particulars be....
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....d the cost of goods used for construction of the office building/administrative office was Rs. 25 crores. According to the learned senior counsel, the aforesaid three works were an inextricable and integral part of the power plant, and were recognized as such by the statutory provisions relating to the establishment of a power project; the correct legal test to be applied, for inclusion of goods in the certificate of registration, was not physical impossibility to generate power without these structures but whether it was commercially inexpedient to do so; and, in arriving at a conclusion, a broader and benevolent view, and not a restricted view, should be taken as it relates to the provision of incentives. The learned senior counsel would place reliance on the provisions of the Electricity Act, 2003; certain clauses in the power project agreement; the Electricity (Removal of Difficulties) Order, 2005; the order of the Central Electricity Regulatory Commission dated January 25, 2008; and the report, of the requirement of power stations, submitted by the Committee of experts to the Government of India, Ministry of Power, Central Electricity Authority, New Delhi, in December, 2007. T....
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....her form of power" in section 8(3)(b) and rule 13 cannot be read to mean in the business of generation or distribution of electricity or any other form of power. Such goods must be intended for use only in the actual activity of generation or distribution of electricity. A similar expression "in mining", used in section 8(3)(b) and rule 13, fell for consideration in Indra Singh & Sons (P.) Ltd. v. Sales Tax Officer [1966] 17 STC 510 (SC), wherein non-inclusion of four items, namely, sanitary goods, spare parts for motor vehicles including tyres and tubes, furniture and motor trucks, in the registration certificate was in issue. The Supreme Court held (page 514 in 17 STC): ". . . We cannot read the expression 'in mining' in rule 13 of the Central Rules to mean in the business of mining. The goods must be intended for use only in the actual activity of mining which would include raising the coal and storing it in heaps or in warehouses. But in our opinion the expression cannot be extended to include delivering the coal to a siding at the railway station. Therefore, the High Court was right in holding that these two items, namely, spare parts of motor vehicles including tyres....
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....wires, sati pillars, etc., for construction of power house building, and other associated civil works; 3. H.S. meters, G.I. pipes, street light fittings, etc., for construction of power house, and central room required for operation and maintenance; 4. Road materials like chips, tars, road rollers, concrete mixer and vibrator, manure, water treatment plants, filtrations plants and associated materials, etc., for the purpose of water supply system; 1Here italicised. 5(a). I.D. fans, coal mills, etc., required for feeding coal to the boiler to run the turbine; 5(b). Hydrogen generation plant for feeding coal to run the turbine; 5(c). Passenger elevators for operation of the power house; 5(d). Generator phase bus duct, etc., to evacuate generated power to be incorporated in the switchyard; 5(e). L.T. transformer power to evacuate generated power; 5(f). Cable trays, conduits and other accessories, unit control board with synobronising bracket, station control board, switchyard control board, etc., and 5(g). Electrical and pneumatic, analytical instruments required for operation and maintenance of the power house, i.e., plant. On the question, whether goods used for construction ....
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....lant. Without this construction, it would not be possible on the part of the petitioner to engage in the generation of electricity and distribution thereof and therefore, findings of the Commissioner without scrutiny of the law as laid down by the apex court, are also erroneous. (emphasis1 supplied) In Orissa Power Generation Corporation Limited [2008] 15 VST 587 (Orissa), the Division bench of the Orissa High Court, relied on the judgment of the Supreme Court in Commercial Taxes Officer, Circle D, Jaipur [1997] 104 STC 89 (SC), to hold that the term "power house building" implied that such a building was being constructed to house the power generator, or was a building where the thermal power plant should be installed for generation of power; applying the functional test, it would not be possible to establish a thermal power plant without a power house building; and the power house building and associated civil structures constituted an integral part of the thermal power plant. In Rajasthan State Electricity Board [1980] 45 STC 201 (Raj), on an application being submitted under section 15(2)(b) of the Act, the Rajasthan High Court directed the Board of Revenue to refer the follow....
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.... supply or sale of electricity to the consumers. In the Madhya Pradesh Electricity Board's case [1970] 25 STC 188 (SC), which is equally applicable to the facts of the present case, their Lordships of the Supreme Court held that the Electricity Board was a 'dealer' in respect of its activities of generation, distribution, sale and supply of electrical energy and that electrical energy can be stored and transmitted and, though it may not be moved or touched, yet it has all the attributes of movable property. When the Electricity Board is engaged in the business of distribution and transmission and supply of electrical energy and, for the purposes of sale thereof to the consumers, the laying down of transmission lines, fixing of poles, etc., form an integral part of its business and, for that purpose, such motor vehicles as trucks, trolleys and trailers are necessary for carriage of cables, poles, wires, other electrical equipments and labour. Thus, in our view, motor vehicles, meaning thereby only trucks, trolleys, trailers and the like, but not passenger vehicles, as also their accessories and spare parts, tyres and tubes can be purchased by the Electricity Board at th....
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.... the judgment of this court in J. K. Cotton Spinning & Weaving Mills Co. Ltd. v. Sales Tax Officer, Kanpur [1965] 16 STC 563 (SC); [1965] 1 SCR 900. We do not find anything in that judgment that runs counter to the view taken by the High Court. It was held in J. K. Cotton Spinning & Weaving Mills' case [1965] 16 STC 563 (SC); [1965] 1 SCR 900 that if a process or activity was so integrally related to the ultimate manufacture of goods so that without that process or activity manufacture may, even if theoretically possible, be commercially inexpedient, goods intended for use in the process or activity as specified in rule 13 would qualify for special treatment. The motor vehicles aforementioned and soaps, paints, raincoats and battery cells, to the extent aforementioned, are integrally related to the distribution of electricity and their non-use would make distribution commercially inexpedient. In Travancore Tea Estates Co. Ltd. v. State of Kerala [1977] 39 STC 1 (SC); [1977] 1 SCR 755, what was in issue was the use of fertilizers in the manufacture of tea. This court distinguished between the agricultural process of cultivation of tea and the subsequent manufacture or processing....
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....ture has contemplated that the goods to qualify under section 8(3)(b) must be intended for use as raw materials or as plant, or as equipment in the manufacture or processing of goods, and it cannot be said that building materials fall within this description. The High Court was, therefore, right in rejecting the claim of the company in that behalf." (emphasis1 supplied) The afore-extracted observations of the Supreme Court, in J.K. Cotton Spinning & Weaving Mills Co. Ltd. [1965] 16 STC 563 (SC), were not noticed by the Division Bench of the Orissa High Court in Orissa Power Generation Corporation Limited [2008] 15 VST 587 (Orissa). As held by the Supreme Court, in J.K. Cotton Spinning & Weaving Mills Co. Ltd. [1965] 16 STC 563 (SC), building material used as raw material even for construction of a plant cannot be said to be used as plant in the manufacture of goods or, as in the case before us, the generation or distribution of electricity. In the present case building material has been used for the purpose of construction of a labour colony, administrative building, and a boundary wall. In view of the law laid down by the Supreme Court, in J.K. Cotton Spinning & Weaving Mills Co.....